Oil Price Falls Below $98 as Dollar Strengthens

The price of oil fell below $98 a barrel Thursday amid reduced trading volumes and the impact of a strengthening dollar.

By early afternoon in Europe, benchmark oil for February delivery was down 72 cents to $97.70 on the New York Mercantile Exchange. On Tuesday, the Nymex contract fell 87 cents to close the year at $98.42. Markets were closed Wednesday for New Year's Day.

The Nymex contract gained 7 percent in 2013 on hopes for stronger demand in the coming months pegged to the signs of a recovery in the U.S., which is expected to help revive other major global economies.

The brighter prospects for the U.S. economy have also helped boost the dollar over the past few trading sessions. A stronger dollar tends to push down oil prices by making crude more expensive for buyers using other currencies.

"Further improvement in the U.S. economy should be supportive of the U.S. dollar and that will continue to play against oil demand in emerging markets," said Olivier Jakob, an analyst at Petromatrix in Switzerland. He highlighted recent protests in Kuala Lumpur, Malaysia, against rising gasoline prices.

On Thursday, the euro was down 0.7 percent against the dollar, at $1.3647.

Meanwhile, traders are monitoring data on supplies. The industry-funded American Petroleum Institute reported late Tuesday that U.S. crude stockpiles fell 5.7 million barrels the week ended Dec. 27. The report from the Energy Department's Energy Information Administration — the market benchmark — will be out on Friday.

A survey by Platts, the energy information arm of McGraw-Hill Cos., showed analysts are expecting a draw of 1.5 million barrels in crude stocks.

While the Nymex contract rose above $100 last week for the first time since October, trading volumes on Thursday were around half of usual levels.